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The In-Store Pharmacy: Back to a Different Future


There was a time when grocery stores sold groceries and retail pharmacies sold prescription medicines, OTC (over the counter) and health & beauty. But over the years, grocery retailers have stretched into the pharmacy space looking to drive additional footfall and revenue. Yet while the strongest players in the US, such as Walmart and Kroger operate significant pharmacy operations, they still sit firmly in the single digits for pharmacy market share. Recent years have been especially tough on in-store pharmacies. With low prescription volumes and undifferentiated H&B categories, growth has stalled and even declined as the industry has evolved. As such, grocery-led pharmacy seemed destined to slowly fade away as a casualty of financial cuts and focus back to core offerings.

Enter the Coronavirus.

Suddenly, the future has much less to do with the past and far more to do with the present.

In just a matter of weeks, there has been a global shift dramatically impacting the shopping missions of customers in both how they shop and what priority products are purchased. As we have collectively moved through lockdowns and closures, customers have settled into a new and dramatically different rhythm with a major emphasis on safety and efficiency.

  • Less frequent trips but bigger baskets: As the initial waves of customer traffic subsided, retailers are seeing a significant decrease in customer counts that are significantly below YoY trends. This impact is being offset by large basket sizes in both units and spend as customers seek to limit trips in hopes of minimised virus exposure.
  • Massive move to online: The transition to ecommerce has been an evolution 15 years in the making. 2019 saw a 14.9% jump in online retail sales in the US, bringing total online spending to 16% of total retail sales. The Coronavirus has accelerated that growth trajectory through two main drivers: providing a convenience solution to families that are now homebound and by providing a direct health need for all customers to limit in-store activities, especially older customers who have been slowest to adapt to ecommerce and now those that have the greatest need to use it.
  • Localisation: In addition to fewer trips, customers are also narrowing their range of locations and retailers as they seek out the best option to fit their needs. This is not simply moving to the store that was most shopped prior, but an open consideration of new options as well.
  • Value: During the early rush on hand sanitiser and OTC products, value was of little concern to customers. Now as the full impacts of the shutdown are being felt in terms of job insecurity and unemployment, sensitivity to price, balanced with the right level of quality will become increasingly critical to maintain customers.

As countries collectively move through the Coronavirus pandemic, these behaviours will continue to harden. A new focus on in-store pharmacy could now be a central strategy for grocers, not as a resurrection of the past, but based on the needs of the future.

Stretching across the behavioural shift comes a heightened awareness of staying healthy and practising good hygiene. This has impacted health & beauty categories as customers are learning to be self-reliant now hair salons and beauty spas are shut down. Walmart's CEO has stated that we are in the third phase of panic buying, of which two of three centred on H&B/OTC products [1]. Even after the pandemic subsides, this broader view of personal health, that includes wellness of the person and their surroundings will drive a more holistic set of requirements that are met by grocery and pharmacy products and services.

China's experience with SARS and Covid-19 teach us that much of the acceleration of ecommerce will remain. Grocers will find themselves with increasing levels of underutilised space that can be repurposed with a supercharged version of the pharmacy that reflects the needs and expectations of today. Space will be outfitted with an emphasis on clinical services as well as prescription dispensing. The new services could encompass testing, vaccination, and relief of basic primary care so that hospitals can address those that need it most. Investments can be made in supporting H&B/OTC categories that allow grocers to build credibility in this space that had been previously a peripheral business.

The ability to implement such aggressive changes is a daunting task, especially in uncertain times. One approach to consider is the formation of strategic alliances with an experienced player in the space, specifically retail pharmacies. In the US, former competitors have joined forces to varying degrees with CVS assuming pharmacy operations at Target and Schnucks while Walgreens has built several experimental H&B/OTC spaces in Kroger locations. While these are currently limited to tests or purely the acquisition of formerly failing operations, they have the potential to become much more.

The joint operation can benefit as retail pharmacies continue to expand their capabilities in clinical/medical services and sophisticated H&B/OTC that include prominent innovation and leading-edge private label products. It is critical that efforts are co-ordinated, and the experience seamless for the consumer. There is always a risk of a partnership becoming 'two stores within a store' leading to unnecessary complication and a conflicting value proposition.

A successful implementation of this strategy will allow grocers to provide a compelling solution to customers during, and eventually emerging from Covid-19. A strong in-store pharmacy operation could directly address the health need the pandemic has instilled in customers globally and steer their choice of which stores to visit. Grocers could maximise the less frequent, but larger baskets through incremental products and services that are top of mind for customers.

Finally, opportunities to broadcast superior value through Health & Wellness themed combinations of consumables, H&B, and prescription medicines can appeal to customers as they work through the inevitable recession to come.

Just months ago, the in-store pharmacy was on life support, with a future limited to potential third-party operation at best and oblivion at worst. Coronavirus has changed all of that, and while we will emerge from this pandemic, customer behaviours will return to something other than the past. This new present, with its redefined focus in health will make these solutions essential for the grocery store of future.


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